Malawi - Interest

Article 11. Interest

1.   Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2.   However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the interest.

3.   The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

4.   Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if it is derived and beneficially owned by a pension fund that is a resident of the other Contracting State or by the Government of a Contracting State.

For the purposes of this paragraph the term Government of a Contracting State shall include:

a)   in the case of Malawi:

(i)   the Reserve Bank of Malawi; and

(ii)  a statutory body or any institution wholly or mainly owned by the Government of Malawi as may be agreed from time to time between the competent authorities of the Contracting States;

b)  in the case of the Netherlands:

(i)   the Central Bank of the Netherlands (de Nederlandsche Bank NV);

(ii)  Atradius State Business NV in respect of loans granted, approved, guaranteed or insured by the Government of the Netherlands;

(iii) the Netherlands’ Finance Company for Developing Countries (de Nederlandse Financierings Maatschappij voor Ontwikkelingslanden NV); and

(iv) a statutory body or any institution wholly or mainly owned or controlled by the Government of the Netherlands as may be agreed from time to time between the competent authorities of the Contracting States.

5.   The competent authorities of the Contracting States may by mutual agreement settle the mode of application of paragraphs 2 and 4.

6.   The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

7.   Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether that person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

8.   Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

9.   No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment. The competent authority of the Contracting State which has to grant the benefits shall consult with the competent authority of the other Contracting State before denying the benefits under this paragraph.

Protocol:

X. Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of five years after the expiration of the calendar year in which the tax has been levied.